The difficulties facing African startups in the fintech sector have been disclosed by Aisha Ibrahim Tilde, Head of Business Global Expansion at Fuspay Technology. She also highlighted some of the key possibilities for Fintech in Africa, like how African companies can access the market.

“One of the areas that has recently emerged in the finance and banking industry is financial technology, and it is essential for the involved sectors in all countries around the globe to keep up with this development. One of the most significant findings of this technology is that financial technology known as Fintech is a recently established industry that would offer all types of conventional financial services, but in a more advanced, rapid, and accurate manner” she says.

She also noted that African continent have made great strides in this field despite its recentness, While the use of financial technology and its volume of transactions in the continent  is still modest when compared to the developed countries in the world despite development of the future strategies, electronic payment, and electronic commerce that African countries put in place for economic diversification make them encourage the establishment of financial technology in their economies. African should take advantage of the available opportunities and face the challenges facing the application of this technology, especially the development of modern regulatory legislation that would create a business environment that supports the economy in general. 

Between 2020 and 2021, the number of tech start-ups in Africa tripled to around 5,200 companies. Just under half of these are fintechs, which are making it their business to disrupt and augment traditional financial services according to McKinsey analysis that shows African fintechs have already made significant inroads into the market, with estimated revenues of around $4 billion to $6 billion in 2020 and average penetration levels of between 3 and 5 percent (excluding South Africa). Instead of a “fintech upheaval,” the continent is currently going through a “fintech eruption,” and both domestic and foreign investors are paying attention. With average deal sizes rising and the percentage of fintech financing in Africa increasing over the past year, African fintech is emerging as a hotspot for investment, bringing development and employment to African economies.

In spite of the incentives available in the field of fintech in the African region, there are still numerous significant structural and institutional barriers that prevent the development of technology finance in the African nations. The possibility of entering international financial technology firms that are already active in the markets is hampered by the currently unfavorable business climate in general and the issue of ongoing restrictions on the entry of foreign entities to the markets.

Additionally, the decline of private and investment capital, which is the basis for the existence and progress of financial technology in the economy, for any country has contributed to creating a challenge in this area. In fact, the difficulties that need to be overcome quickly may be the lack of an adequate level of legal legislation due to regulatory gaps impeding the growth of the financial technology sector, despite the ongoing work to develop regulatory frameworks for digital financial services, and the development of laws regarding the issuance of cryptocurrencies. On the other hand, Prices and quality of Internet and mobile phone service may be one of the factors that cause pressure and impediment in the financial technology sector despite the high penetration rates of information and communication technology in recent years.

Unfortunately, the institutional support necessary to have an incubator environment for fintech remains below the required level, as a few African countries have established incubators and accelerators to help increase startups, which allow fintech companies and institutions to make traditional tests of innovations in the actual environment. From the demand side of fintech services the “confidence gap” and financial awareness levels is a major constraint for fintech startups where using fintech as a payment channel requires confidence to reduce uncertainty. In addition, there is the problem of promoting this type of services and the problem of the educational level for the customer in the African countries. Moreover, the problems of cyber risk, where cyber-attacks may lead to disruption of operation, incur financial losses, damage to reputation, and it may become a handicap restriction unless information security frameworks are strengthened. Rigorous enforcement of banking secrecy law and money transfer regulations is a constant threat to fintech companies IMF (2018). 

Finally, fintechs have become major players in the African financial-services sector (in some instances, rivaling traditional banks in terms of size and value), funding has increased, and value is being generated. In fact, the number of high-valued fintechs is increasing exponentially. Additionally, consumer access is at an all-time high. Today’s leaders have built the payment rails, effectively laying the foundations upon which the industry can grow, but tightening market conditions suggest that in their next phase of development, fintechs may need to adapt their focus as they look to consolidate and formalize to achieve enduring success.